The economics of new car sales

[daemon]

liner33 said:

Genuine questions here

How will the balloon payment work and the GFV? Presumably if you do say 35k per year (25k business and 10k private) you will have a Golf with nigh on 120,000 miles on the clock ?

You would either use the higher miles as part of the mileage calc when setting up the PCP, OR you would opt for a lower miles in the contract and never return the car to the finance company at the the end of term (ie, you'd trade it in OR pay the residual value)

Personally, with those sorts of miles i'd do a straight finance deal over a longer term, then mileage wont come in to it.

If you were to finance £12000 over 5 years at the best of the rates available on money supermarket you'd be paying £220 a month.

[CarlT]

liner33 said:

daemon said:

The z4 was bought new.

The golf at nine months old.

Genuine questions here

How will the balloon payment work and the GFV? Presumably if you do say 35k per year (25k business and 10k private) you will have a Golf with nigh on 120,000 miles on the clock ?

You wouldn't have a PCP for 35k per annum

[liner33]

CarlT said:

You wouldn't have a PCP for 35k per annum

That's what I thought

[liner33]

daemon said:

Personally, with those sorts of miles i'd do a straight finance deal over a longer term, then mileage wont come in to it.

If you were to finance £12000 over 5 years at the best of the rates available on money supermarket you'd be paying £220 a month.

So why didnt you go that way ? Why was pcp better than finance or paying out of savings ?

[xRIEx]

liner33 said:

Why was pcp better than finance

[Sheepshanks]

nct001 said:

It's funny how many fail to understand the tax and other associated relevance of leasing.

High net worth individuals lease not for lack of funds but for ease of budgeting, low hassle and tax benefits.

There's no tax benefit to an individual for leasing.

nct001 said:

A family member is leasing a new slk for under £5k for two years ...
the maintenance would be at least £2000

The low cost deals never include maintenance, but anyway it might be possible to get away with an A service at £250. Worst case it would also need a B service, about another £450.

[Justin Case]

In some cases a particular deal may mean that a PCP may cost less over a three year period, but often buying will prove cheaper, again depending on the deal that you can do.
As for affordability, some people may have a decent income but no capital, in which case they can afford to obtain a brand new car, if not purchase one outright. No difference, you have the same car and your finances still aren't overstretched. If only some people could appreciate this.

EK993 said:

2. Not everyone wants to run around in a 5 year old second / third hand car.

Why not? Buy a car that has been looked after, (there are plenty available at the end of their PCP contracts ) and you are unlikely to have a car that has significantly deteriorated or will be unreliable, you could even afford the car you couldn't afford new, but that of course is a completely different argument.

[nickfrog]

daemon said:

nickfrog said:

Or you could get exactly the same incentive (or more) by buying through a broker (often a lease company with a different front). Or choose a brand that offers the same incentives irrespective of finance method like BMW. But unlike Mercedes for instance.

To get the extra finance contribution you still have to use the manufacturers finance. NO YOU DON'T IN MANY CASES LIKE BMW. AND IF YOU DO, THE BROKERS OFFER DISCOUNTS EQUIVALENT TO DISCOUNT+CONTRIBUTION. IT DOESN'T MATTER WHAT IT'S CALLED

nickfrog said:

Still, I would genuinely like someone to tell me how I could have leased the Qashqai for less than the £173/month that is has cost us in depreciation over 3 years.

Did we not establish a number of pages back that you appear to be the exception to the norm? We could look at other exceptions to the norm such as the Golf R deals for example?
No we didn’t. Why would a family car like the QQ (after having done my homework on a number of other family cars comparing cash to lease) be more of an exception than a Golf R? The Golf R must sell 10,000 to 1 surely. Where is the exception here ? Is the Golf R the norm now ? Are you serious ? I never claimed to have a holistic view of the market btw but quoting the short lived low lease deals on the R is the worst possible reflection of the reality compared to permanent broker deal for cash. In my observation of lease deals for “family cars” 20% difference is a good rule of thumb in favour of cash (when bought properly of course, which is one phone call to a broker away, if you have the liquidity)

nickfrog said:

List was £20.5k, Broker price £16,870. This was the best value family car for us having looked at an array of others (both on lease and cash deals of course).

I know it's one example and I have never claimed to have looked at the entire automotive product offering available (why would anyone do that?).

Exactly. You cant extrapolate your own particular circumstances across the millions of car transactions that happen in the UK each year. I DON'T WANT TO EXTRAPOLATE ANYTHING. I am just sharing my experience / observations, isn't that easy to understand ? YOU extrapolate based on the Golf R remember, how reflective is that of the market as a whole ?

nickfrog said:

Again, I am totally impartial as I don't care about what method I use, I have no prejudice, I want the cheapest way. Which, for me (I have no intention to speak for the rest of the population and averages don't matter to me), is cash.

There we go. Again, your method worked for you. Other methods work for other people. Doesnt make them "stupid" and doesnt mean they "cant afford it".

AGREED. And choosing cash for high volume family cars because it's cheaper when bought properly shouldn't lead to sarcastic jibes about being a "financial expert"

nickfrog said:

We'll definitely look at the lease deals for the daughter's forthcoming car of course as I have no pre-conceived ideas unlike the renters if would seem.

I have no preconceived ideas. In fact i've never leased a car, and never intend to - i think they are a bit too restrictive for me personally. Doesnt mean they dont work for other people. And i wouldnt be so derrogatory as to call them "renters". Nothing derogatory, just factual.

nickfrog said:

Loss of interest ? Yield over the past 3 years has been terrible on cash ISA (ie similar amount of risk to putting it in a car) and just about matched inflation and anything over the ISA/NISA threshold attracts 40% tax anyway so your capital shrinks as this would have been less than inflation. The last thing I want is cash in the bank. I'd rather invest it and be prepared to take a risk while putting some of it in a car rather than pay more each month. I appreciate not everyone can do that but tough, not my fault. Oh an this is not finance expertise btw, just very very basic stuff. My financial knowledge is rudimentary.

Not much of an investment if its returning -40% in three years. I said invest some of it (pension, property, NISA) and put some of it in a car, not invest in a car

nickfrog said:

As for second hand cars these are my last 3 cars :

2006 987 Boxster - Bought June 2011 - sold Jan 2012 - £123.53 depreciation per month.
2008 MINI Cooper S - Bought January 2012 - sold June 2013 - £74.25 depreciation per month.
2008 125i - Bought June 2013 - sold November 2014 - £17.10 appreciation per month.
Will I do as well with the GT86 ? I doubt it but I can see it selling for £10k in 3 years, crystallising £180/month depreciation.

Good for you. 50% of the cars in my profile i made a profit on when i sold them. That doesnt mean i cant see the reasoning behind someone leasing / PCPing / finance new, if they chose to do so. Why do you go on about 3 year old cars losing 50% in the 3 subsequent years then ?

nickfrog said:

We all make decisions based on our own fiscal and cash flow situations, that doesn't mean that anyone is right or wrong but there is a certain element of reverse snobbery at play here IMO.

Yes. Absolutely there is. You only have to look at terms being used when people lease or PCP like "renters", "cant afford to buy them", "like renting a TV", etc, etc, to see that yes there is reverse snobbery going on - by people who cant see that other methods suit other people at other times better.



That's exactly how I see it about people ridiculing others because they pay cash even though cash for them proves cheaper

[nct001]

Sheepshanks said:

nct001 said:

It's funny how many fail to understand the tax and other associated relevance of leasing.

High net worth individuals lease not for lack of funds but for ease of budgeting, low hassle and tax benefits.

There's no tax benefit to an individual for leasing.

nct001 said:

A family member is leasing a new slk for under £5k for two years ...
the maintenance would be at least £2000

The low cost deals never include maintenance, but anyway it might be possible to get away with an A service at £250. Worst case it would also need a B service, about another £450.

It replaced a 2008 SL which was costing £2k a year to maintain, ie roof motor system, failed twice in two years due to water ingress, despite being parked in a garage. Cost of keeping bits working that some how fail, ie battery and then battery coding etc and then a window regulator etc etc. A brake fluid change that an independent cannot do unless done at a main dealer wtf! And then £500 a year road tax. The SL will go down by £4k at least in next two years and was not easy to sell.

Granted they are not car people and just want a car to use and cannot be bothered with messing about trying to fix things themselves.

It will be serviced once and ideally no TYRES then it will go to bca Bedford which seems to be a favourite Mercedes fleet dumping ground to be resold... would we want it, not really.

Edited by nct001 on Saturday 22 November 17:19

[daemon]

liner33 said:

So why didnt you go that way ? Why was pcp better than finance or paying out of savings ?

I'm only doing around 20,000 a year ish. 35K pa would be a killer for a PCP deal.

I've mine on a 4 year PCP deal. There was a finance contribution from VW from memory and they were offering a free servicing pack too.

From memory there wasnt much in it either way.

We'll be clearing the PCP agreement early in summer '15 if all goes to plan.

[Sheepshanks]

nct001 said:

It replaced a 2008 SL...

It's bit of a stretch to make financial comparisons using SLK vs SL.

Edited by Sheepshanks on Saturday 22 November 17:37

[daemon]

nickfrog said:

That's exactly how I see it about people ridiculing others because they pay cash even though cash for them proves cheaper

Well then you're clearly reading it wrong.

From the get-go on this thread we've had the jibes about "cant afford to buy it", "only stupid people buy a new car on PCP", "renters", etc, etc. There are quite a few of us attempting to correct that perception by demonstrating an objective viewpoint on the various ways you could get a new car.

Clearly if a cash purchase works for you on any particular occasion, thats great. 50% of the cars in my profile history were cash purchases and it may suit next time to do so. I'll just weigh up the options at the time and see what works best.

Using jibes like "renters" and "if he spent less time on this thread he could get a better job and be able to buy a car" are unnecessary and derrogatory. When someone pushes back though or questions your choices then you get "offended".

Maybe if you cant take it, dont give it out?

Edited by daemon on Saturday 22 November 17:42

[EK993]

Justin Case said:

In some cases a particular deal may mean that a PCP may cost less over a three year period, but often buying will prove cheaper, again depending on the deal that you can do.
As for affordability, some people may have a decent income but no capital, in which case they can afford to obtain a brand new car, if not purchase one outright. No difference, you have the same car and your finances still aren't overstretched. If only some people could appreciate this.

This is an important distinction that you hVe made - there is a difference between having the ability to pay for something upfront versus being able to afford to afford to pay for it monthly.

And isn't saving up for something so you are able to pay for it upfront effectively a "monthly payment"? You are putting aside a set amount of money each month, a payment if you will.

[liner33]

daemon said:

I'm only doing around 20,000 a year ish. 35K pa would be a killer for a PCP deal.

I've mine on a 4 year PCP deal. There was a finance contribution from VW from memory and they were offering a free servicing pack too.

From memory there wasnt much in it either way.

We'll be clearing the PCP agreement early in summer '15 if all goes to plan.

I did think that 35k would be a killer on pcp

Its just that you say in your garage that you do 25k business plus personal use , thats where I got the 35k figure from and hence my confusion.

"Doing 25,000 miles a year of commuting plus personal miles so makes sense. Averaging 69mpg brim to brim"

[Sheepshanks]

EK993 said:

Justin Case said:

In some cases a particular deal may mean that a PCP may cost less over a three year period, but often buying will prove cheaper, again depending on the deal that you can do.
As for affordability, some people may have a decent income but no capital, in which case they can afford to obtain a brand new car, if not purchase one outright. No difference, you have the same car and your finances still aren't overstretched. If only some people could appreciate this.

This is an important distinction that you hVe made - there is a difference between having the ability to pay for something upfront versus being able to afford to afford to pay for it monthly.

I usually pay cash, because my income is a bit variable as is the use the cars get.

However bought a Honda for my daughter a couple of months ago and was very miffed to be "forced" to take a PCP at 0% as there was an extra £500 discount. I still haven't worked out what the "scam" is, but it seems slightly ridiculous to force PCPs on people.


Generally, I think the bad thing about heavily subsidised PCPs and lease deals is that they're distorting the market - people are getting cars at prices that aren't available to cash buyers.

[liner33]

EK993 said:

This is an important distinction that you hVe made - there is a difference between having the ability to pay for something upfront versus being able to afford to afford to pay for it monthly.

And isn't saving up for something so you are able to pay for it upfront effectively a "monthly payment"? You are putting aside a set amount of money each month, a payment if you will.

Very true and the fact is that not everyone can save, we do live in a "NOW" generation , of course it makes more sense to run a cheap car and save up but not everyone can be bothered nor has the circumstances to wait. You either wait or you pay extra and have it now , it has always been thus , but some people dont like to hear that.

[EK993]

liner33 said:

Very true and the fact is that not everyone can save, we do live in a "NOW" generation , of course it makes more sense to run a cheap car and save up but not everyone can be bothered nor has the circumstances to wait. You either wait or you pay extra and have it now , it has always been thus , but some people dont like to hear that.

Precisely. If you have 3 years of finace on a car and successfully pay it off - by definition you can afford the car. You have just chosen to pay extra for someone to give you the money upfront rather than put aside money each month and buy it at the end of that period.

That is entirely the choice of the individual and has nothing to do with being able to afford something.

[nct001]

Sheepshanks said:

It's bit of a stretch to make financial comparisons using SLK vs SL.

Edited by Sheepshanks on Saturday 22 November 17:37

To be fair pre face lift example, so pretty dated. Bought from main dealer as approved used at 18 months old for £45k at 9k miles and sold four years later for £18k at just 27k miles!!! So yes they are more than happy to not have SL running costs!

Only used to go to shops and town, found sl too pretentious and too big to drive around town.

Main dealer or specialist fault fixing and servicing and road tax alone made a brand new slk cheaper to run.

[Randy Winkman]

I've nothing against people buying cars in whichever way they want - but will the PCP/lease thing reach a point where it runs out of steam because of economic reasons? i.e. People have been buying things that are more expensive than they would have been able to save and buy and that just comes to a natural end?

[nickfrog]

daemon said:

nickfrog said:

That's exactly how I see it about people ridiculing others because they pay cash even though cash for them proves cheaper

Well then you're clearly reading it wrong.

From the get-go on this thread we've had the jibes about "cant afford to buy it", "only stupid people buy a new car on PCP", "renters", etc, etc. There are quite a few of us attempting to correct that perception by demonstrating an objective viewpoint on the various ways you could get a new car.

Clearly if a cash purchase works for you on any particular occasion, thats great. 50% of the cars in my profile history were cash purchases and it may suit next time to do so. I'll just weigh up the options at the time and see what works best.

Using jibes like "renters" and "if he spent less time on this thread he could get a better job and be able to buy a car" are unnecessary and derrogatory. When someone pushes back though or questions your choices then you get "offended".

Maybe if you cant take it, dont give it out?

Or maybe you're reading it wrong.

I think the perception that cash is more expensive is wrong based on personal experience and at least for family cars. Then you tell me that doesn't reflect the reality yet you come up with the Golf R example which represents a minuscule proportion of family cars. How objective is that ?

I have called people who rent "renters" because that's what they are, I had no idea one could be susceptible enough to get offended. What's wrong with renting ? If you can think of a better word, I will happily use it instead, I don't want to hurt anyone feelings, seriously/

You claim I have said : "if he spent less time on this thread he could get a better job and be able to buy a car"

This is what I said :

nickfrog said:

If people spent less time posting all through the day, maybe they would make a better living...

Is that what you call objectivity ? Freudian slip, surely. It does explain why you are so bitter.

Again, I deal with facts, if you can afford to dedicate so much time during working hours to posting, then you're either doing well or not as well as you could.

Surely it's a simple concept : the more you work, the more successful you are. None of my staff are allowed to do this during working hours and they're pretty successful financially

Funny how selective you are in quoting my comments too.

Edited by nickfrog on Saturday 22 November 18:32